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Amazon Deal a Win-Win for CA

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Amazon Deal a Win-Win for CA

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Score a rare victory for the California state legislature over Amazon and the other retailers seeking to avoid collection of sales taxes on purchases from California customers.

At a minimum, the outcome means an additional $200 million for the state treasury, although some observers believe the amount may mushroom to $1 billion or more annually in the years to come.

Of course, the ultimate agreement did not come without its share of drama. After the legislature voted to require retailers to collect sales taxes, Amazon launched a campaign to collect enough signatures for a statewide election to undo the new policy.

But several factors combined to force Amazon's retreat.

Among them:

--The incredible backlash from the public against a company that had enjoyed immense popularity as a discount outlet, and which now appeared to be guided by disproportionate greed.
 

--The potential financial cost to Amazon of perhaps $100 million or more in an election campaign fraught with great uncertainty.

--The power of Wal-Mart and other big retailers who roiled against Amazon's unfair advantage against similar companies.

--The clout of the California Retailers Association, an organization of small businesses that are required to collect sales taxes, thereby placing them at a disadvantage with Amazon, and adding to the state's unemployment woes with so many going out of business or laying off employees.

The folks at Amazon are no dummies.

In the end they calculated that between all the bad press, the pressing efforts at similar policies in other states, and the renewed attention in Congress, perhaps it would be best to pare their losses and negotiate a deal that will begin sales taxes collection in a year unless Congress intervenes with a national policy.

So Amazon cut the deal.

Beyond the retailer sales tax law, does this mean that the legislature finally has the gumption to take on big money and special interests?

Don't hold your breath.

At the same time they declared victory over Amazon, legislators refused to roll back a monstrous $1 billion corporate tax break they awarded big businesses in 2009.

They also doled out $100 million in tax breaks for Hollywood film makers to keep California competitive.

Legislators once again refused to increase California's low taxes on tobacco and alcohol. They also refused to pass an oil severance tax in the only state that does not tax oil coming out of the ground.

All these actions (or lack thereof) were the result of powerful interests keeping the legislature in line.

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Related Topics Amazon, sales tax, California
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